Pressure is mounting on the Big Six energy suppliers to cut their prices after Ovo Energy announced it is slashing 5% off bills for new customers on its fixed dual fuel tariff.

The small independent energy company has bucked the trend of rising costs and is now the cheapest provider for fixed dual fuel tariffs on the market.

Ovo’s move today, January 6, undercuts all the comparable tariffs offered by the Big Six energy companies and could save the average UK household £55 on its annual fuel bills.

Available only to new customers or existing customers as they renew their contracts, the reduced ‘New Energy’ tariff is expected to put pressure on the Big Six to lower their prices in line with falling wholesale prices.

Ovo is the second small energy provider of the season to cut its prices, following Co-operative Energy’s announcement that it is cutting its prices by 3% with effect from February.

Scott Byrom, energy manager at MoneySupermarket, said: “Ovo Energy has delivered a belated Christmas gift to consumers; effective immediately it has knocked 5% from the cost of gas and electricity for dual fuel customers – both new and existing who are due to renew their Ovo Energy ‘New Energy Fixed’ tariff.

"The move sees Ovo cut £56 a year from the average bill, which now stands at £1,059 meaning this is the cheapest product available on the market.

“This is a welcome boost to the beleaguered back pockets of the 70,000 Ovo Energy customers, just as the cost of an expensive Christmas season is kicking in.

But while the pressure eases slightly for those bill payers, the spotlight shines even brighter on the Big Six to pass on the current savings made from the fall in wholesale costs.”

The gauntlet is down

Last year saw almost all of the Big Six announce price hikes by at least 10%, but Ovo says that falling wholesale prices have allowed it to pass on the savings to consumers.

Stephen Fitzpatrick, Ovo Energy’s Managing Director, said: “Due to a recent decrease in wholesale costs, we are able to respond and pass on these savings to consumers, thereby giving them a cheaper and simpler alternative to the Big Six.

“January is always a challenging month for everyone’s bank balances, so we’re delighted to do what we can to help make paying for energy a little easier.”

Ovo’s price cut takes effect immediately, but will not affect existing customers who are on a fixed contract and the company’s variable rate prices. Ovo delighted its variable rate customers in November last year when it cancelled its plans to increase prices.

Scott added: “While we may be on the cusp of a sea change in the industry, bill payers can take action and make their own savings by making sure they are on the best energy deal for their usage and region.”